Canadian P&C insurer reveals plan to go private

The Insurance Company of Prince Edward Island (ICPEI) has proposed deal that would have company directors, executives, certain employees and investors buy a majority stake in the insurance company and take its ownership private.

The proposed deal was announced Friday by ICPEI Holdings Inc., which operates in Canada’s P&C insurance industry through its wholly owned subsidiary, ICPEI. The insurer provides commercial and personal lines of insurance products exclusively through the broker channel.

ICPEI reported a 2021 underwriting profit of approximately $8.5 million based on $66.7 million direct premiums written for a market share of 0.09% (based on net premiums written), according to MSA Research stats published in the 2022 Canadian Underwriter Stats Guide.

The company expects to hold a special meeting to consider and vote on the proposed deal in February 2023. If approved at the meeting, the transaction is expected to close in 2023 Q1, subject to court approval and other customary closing conditions.

Under the proposed deal, a consortium including key members of the company’s executive management team and certain other company employees and shareholders will indirectly acquire all of the company’s issued and outstanding common shares for $4 per share, the company announced Friday.

Desjardins General Insurance Group Inc. is also member of the consortium, as are certain other unnamed company investors. The deal would work out to a multiple of 2.1 times the price-to-book value, as of the company’s September 2022 balance sheet.

When the smoke clears, ICPEI would be privately owned by a 66% majority of the company’s executive directors, managers and certain employees. This group of shareholders would include, among others, president and CEO Serge Lavoie, board chairman Murray Wallace, company director Robert Ghiz, CFO Teddy Chien and general counsel Ken Coulson.

Currently, the company’s directors, executives and employees own approximately 33.1% of the company’s shares.

If the deal is approved, Desjardins would hold an indirect interest in 27.5% of the company, while unnamed investors are expected to own as a group (directly and indirectly) the balance of approximately 6.4% of the company.

A special committee comprised of Sharon Ranson and James Falle was established to consider the deal. Origin Merchant Partners acted as financial advisor to the special committee.

“After careful deliberation, the special committee considers that the transaction represents the best available path forward for the company and its shareholders,” said Ranson, director and co-chair of the special committee of independent directors. “The transaction will provide shareholders, other than the rollover shareholders [i.e. the executive and employee group in the consortium], with immediate and certain cash value, while providing the company with additional flexibility to operate as a private company in the hands of a committed long-term investor.”

The proposed deal follows a statutory plan of arrangement under the Ontario’s Business Corporations Act.

Feature image courtesy of iStock.com/gorodenkoff